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Item 4(c) Tip Sheet

(04/26/12)
Item 4(c) Studies, Surveys, Analyses and Reports
Item 4(c) requires parties to include all studies, surveys, analyses and reports which were
prepared by or for any officer(s) or director(s) (or, in the case of unincorporated entities,
individuals exercising similar functions) for the purpose of evaluating or analyzing the
acquisition with respect to market shares, competition, competitors, markets, potential for sales
growth or expansion into product or geographic markets. These documents help the FTC and
the Antitrust Division of the DOJ understand the competitive impact of a transaction.
Responding to Item 4(c) can be confusing for filers because the items broad language is subject
to a range of interpretations. Documents that are not in fact responsive to Item 4(c) are
commonly included by filing parties, and occasionally responsive documents are overlooked.
This guidance should help parties determine with documents should be submitted.
The documents discussed below should not be considered an exhaustive list of materials
potentially responsive to Item 4(c).
Documents capturing internal and shared analyses
When evaluating a potential acquisition, a buyer frequently will create internal documents that
discuss the pros and cons of making the acquisition. Typical examples of these kinds of
documents are Investment Committee Memoranda and Board Presentations. These documents
often discuss the rationale for the transaction, such as how well the target will fit into the buyers
current business operations. This type of analysis is considered responsive to Item 4(c) and
these documents must be produced, assuming the other criteria are met.
Item 4(c) also contemplates receiving presentations made by the parties to the transaction, such
as management presentations. These kinds of presentation documents may be responsive if the
4(c) criteria are met.
Ordinary course documents
Two questions frequently arise about ordinary course documents. The first is whether a partys
ordinary course document can become a 4(c) document for that party. The second is whether
one partys ordinary course document can become a 4(c) document for the other party.
The general rule is that a document drafted in the ordinary course remains an ordinary course
document regardless of what purpose it may be used for subsequently. For instance, if a
company creates an overview of competitors as a part of that companys quarterly review of the
status of its business, that document does not become a 4(c) document even if it is later
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consulted by an officer at the company in determining whether to move forward on a potential
acquisition opportunity. If, on the other hand, a company creates a list of competitors because it
is looking to evaluate potential acquisition targets, that document, assuming the other criteria are
met, would be responsive to Item 4(c).
Thus, a companys ordinary course documents, including strategic plans or corporate overviews,
are not responsive to Item 4(c) even if they contain an evaluation or analysis of market shares,
competition, competitors, markets, potential for sales growth or expansion into product or
geographic markets, that is 4(c) content. The determination depends on the context in which
the document was originally drafted and does not change thereafter.
There are three exceptions to this general rule:
The first is when an ordinary course document becomes part of a 4(c) document. For instance, if
the companys quarterly review of competitors is circulated to officers of the company along
with a cover memo discussing those competitors and market share in the context of a pending
transaction, that quarterly review is then part of a responsive 4(c) document. Or, if that quarterly
review is put into an officers deal notebook along with other materials responsive to Item
4(c), the entire deal notebook is responsive to Item 4(c).
The second exception to the ordinary course rule relates to Board minutes. Even though Board
minutes are arguably created in the ordinary course, they record the decision-making process of
the Board and must be supplied in response to Item 4(c), assuming the other criteria are met.
The third exception arises when an ordinary course document created by one party becomes a
4(c) document for another party. In considering whether to pursue a given transaction, a buyer
often consults a wide range of material about the seller. One of the most common ways to
facilitate this is through a real or virtual Data Room. In this instance, the seller will place
materials in the Data Room for the buyer to review and analyze. These materials are often
documents created by or for the seller in the ordinary course of its business and as a result are
not considered responsive to Item 4(c) on the part of the seller. But, if an officer of the buyer
consults these ordinary course materials, they can become 4(c) documents for the buyer if they
contain 4(c) content. For example, the seller prepares a market overview in the ordinary course
or has a third party prepare such a market overview in the ordinary course and the seller then
places this market overview in the Data Room. If an officer at the buyer removes this document
from the Data Room, in the case of an actual Data Room, or prints or downloads the document in
the case of a virtual Data Room, it is responsive to 4(c) for the buyer. This market overview
would also be responsive for the buyer if sent by the seller to the buyer, assuming it is in the files
of an officer or director of the buyer. Thus, a document can be responsive to Item 4(c) even if it
was created in the ordinary course by or for one of the parties to the transaction.
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Email
The following guidance applies to the submission of email:
If an email contains 4(c) content, assuming the other criteria are met, it is responsive to
Item 4(c) along with any attachments to that email regardless of whether the attachments
contain 4(c) content.
If an email contains no 4(c) content, but one of its attachments does, that attachment
should be included as a separate 4(c) submission, assuming that it meets the other
criteria.
If an email contains 4(c) content and meets the other criteria, emails replying to the
responsive email or the forwarding of the responsive email need not be included unless
the reply emails or forwarding emails themselves contain additional 4(c) content and
meet the other criteria.
If an email contains no 4c content, but a reply to or a forwarding of the email does
contain 4(c) content, that email chain should be included as one 4(c) document, assuming
it meets the other criteria.
For example, assume you have an email containing 4(c) content and a reply that contains 4(c)
content. The PNO would consider this responsive email chain to be one document. The reply
email would begin the email chain looking down to the original email sent, which does not need
to be separately submitted as a 4(c) document. The description of the email chain in a 4(c) log
would list the range of dates beginning with the date of the reply email and end with the original
email down the chain. The names and titles of all authors and recipients should also be listed in
the 4(c) log. If the reply contained 4(c) content but the original down the chain did not, you
would include the entire chain as a 4(c) document and describe it in the 4(c) log as discussed
above. If the original email contained 4(c) content, but no replies to or forwarding of the
original email contained 4(c) content, then only the original email would be responsive to Item
4(c).
Documents that need not be submitted
Because the requirements of this Item are so broad, documents that are not responsive to Item
4(c) are often included by filing parties. Determining whether a document is responsive to Item
4(c) often comes down to a question of content. The first step in reviewing any potential 4(c)
document should be determining whether the document contains actual analysis or evaluation of
4(c) content. That is, in order to be responsive to Item 4(c), documents must contain more than
just terms such as competitor or market. For example, a list of requested due diligence
items which asks for a list of the sellers competitors or a snapshot of the sellers position in the
market is not responsive to Item 4(c). If, however, this due diligence request included analysis
or discussion of those specific requests, the document would likely be responsive to Item 4(c).
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The following documents are not responsive to Item 4(c):
Documents that discuss only foreign markets
Documents that would otherwise be responsive to Item 4(c) are not responsive if only foreign
markets are discussed.
Documents associated with the public announcement of the transaction
When a transaction involves a public company, there is often a package of materials associated
with the announcement of the transaction, such as a press release, an investor presentation, a
transcript of the investor conference call, a conference call script, and other scripts relating to the
announcement to customers, suppliers, competitors, etc. These publicly-available materials are
not created in order to evaluate or analyze the transaction, but are instead created much later,
when the transaction is set to move forward after public announcement.
Draft documents
It has been the PNOs informal position for many years that if there is no final version of a
document responsive to Item 4(c), the latest draft should be submitted. If there is a final version,
no drafts need to be additionally supplied unless the draft went to the Board. When a copy of a
draft document is sent to the Board, it ceases to be a draft and must be submitted if it meets the
other Item 4(c) criteria, even if a final version is also being submitted.